Better pricing begins with the loan officer.
There's no argument loan officers have enormous impact and influence--good or otherwise--in their production role. Individually, they impact their assistants, other loan officers, direct managers, processors, under-writers, closers and ultimately every customer. Cumulatively, they hold sway over an entire organizaition.
It's why mortgage leaders place enormous emphasis on clarifying their corporate culture. They know that once identified (and most importantly, adopted), the organization begins to think and operate as a whole.
Individual achievement is expected, but when proper expectations are clearly established and embedded in the performance of an organization--specifically production--what springs forth are the greater successes stemming from joint accomplishment.
As part of the team, loan officers for the most part know the drill: Loan applications should be 100 percent complete, all documentation should be thoroughly reviewed prior to going to the ops team, loans should be submitted in a timely manner, excellence in communication (including internal customers) should be a top priority, "underpromise and overdeliver" should be a core discipline and so on. They know whom their performance will impact and they know the upside for them: fewer mistakes, faster turn times, respect from their internal partners, enhanced reputation in the community.
Yet, loan officers routinely overlook one area where they can reap huge rewards: secondary marketing.
Is there a loan officer alive who has not desired better pricing? When asked what impact they have in this arena, loan officers shrug their shoulders and point to the heavens, knowing help in this area comes only from on high.
Individually, that assessment would be correct, but when specific operating principles become the disciplines of an organization, the pricing gods are empowered with more advantageous pricing models.
It all starts with the lock-in. Every extension and every relock comes at a price, and even when the loan officer and/or customer can't/aren't paying for them, the company is. Those costs don't go into the let's be generous' side of the accounting column, but right back into overall pricing.
Before locking a loan, every loan officer should analyze all possible threats to a timely closing. To eliminate all doubt, a timely closing should be defined as "a closing that occurs and funds preferably one to two days prior to the lock expiration date."
That means factoring in short sales, foreclosures, gift monies not yet received, refis with a subordination agreement, an influx of new business that may slow turn times, the sale of another home that may impact the closing, and so on.
So words for the wise: Be smart, and never cut a lock in too close for comfort.
Pull-through can be another costly matter. When a company's pull through drops due to undelivered loans, the company will ultimately be penalized by its investors in the form of less aggressive pricing. That translates to increases on the rate sheet and decreases for the loan officer's bank account, not to mention the possible negative impact on customer relationships and referral sources.
When credit is borderline, or the loan officer originates in an area still experiencing valuation issues or any host of problems threatens a closing, pull-through suffers. Loan officers must thoroughly prequalify the borrower, do homework on potential home-value issues, learn to sidestep landmines upfront rather than risk a blowup and get in the habit of only locking loans where a high level of confidence exists in a closing.
Yes, it's true that secondary has already factored in the fall-out percentages. But what if past performance, indicative of future pricing, changes? Want better pricing? Ensure everyone is hypervigilant about individual pipeline pull-through, and watch the overall positive effect on the company and on pricing.
Actively managed pipelines are also crucial. There is no magic pill; it's the same old mantra, but it's got teeth. Every loan officer knows the drill, or should by now: Weekly pipeline-review meetings are non-negotiable and secondary is notified before a lock is in jeopardy.
From secondary marketing's point of view, one of the biggest byproducts of the Dodd-Frank Wall Street Reform and Consumer Protection Act is the significant increase in the number of relocks and extensions. While it may be true that adjustments to cost cannot be passed to the loan officer in the form of shortages, there is a real cost to the company and that cost hits the loan officer in the form of less-aggressive pricing.
Let's add another component to pipeline management frequently left out--company benchmarks on turn times. These include application-to-processing, processing-to-underwriting, in-and-out of-underwriting, clear-to-close and so on. Proactive loan officers equipped with this knowledge can aggressively manage their pipelines, holding themselves accountable to the company standard or hopefully higher.
Ultimately, it's loan officers' relationships with their referral sources, their commission checks and their future business that's on the line. Anything outside the norm warrants further investigation. This is clearly where the individual performance of many becomes the joint success of all.
The most important concept that sales/branch managers can impart to their sales force is the direct relationship between cost and execution to the rate sheet and the correlation with lock-in and pipeline-management behavior. Secondary only creates the rate sheet; ultimately, the collective behavior of loan officers actually sets the rate.
Casey Cunningham is president of Alpharetta. Georgia-based XINNIX, The Mortgage Academy of Excellence. a provider of leadership development and mortgage sales training with comprehensive programs designed to enhance productivity, manager effectiveness and overall company profitability. She can be reached at email@example.com.